Saturday, June 30, 2007

Watching the news clip from Iranian TV in the day following the gas rationing one would realize that reactions to gas rationing is far from homogenous. In the long queues in front of gas stations a reporter from Open Microphone show of Tehran TV asked people what they thought of gas rationing.

In response some asked that why government had not been constructing new refineries, some said that gas rationing was inevitable however government should have improved public transportation first. Some pointed out that people are burning more fuel waiting in these long queues than driving on streets. An ambulance driver told the reporter that he had received 12 liters, 3 gallons, the night before and already used it up in his first mission, so he had to cancel 5 calls out of 6 in order to come back to the gas station and to wait in the queue to receive fuel. One motorcyclist told the reporter: “I work on my motorcycle and I have a card for 30 liters per month how am I supposed to work with 1 liter per day?”

The aftershocks are not limited to consumers, according to Ham-Mihan reporting from car dealers’ district in Tehran, the demand for cars has fallen drastically and the market is in recession. Many observers are surprised to find out that despite gas rationing the prices of cars have increased, with Peugeot 206 type 2 experiencing the largest increase of 15% according to Ham-Mihan and 5% according to Sarmayeh (Capital) daily. Many expect a hike in the real estate and gold markets. Since the rationing reduces the demand for cars as a capital they expect an increase in demand for saving in the form of gold and real estate.

There is no doubt that demand for public transportation has increased. Keyhan daily reported that cab drivers are asking for higher fares. Although the Taxi Drivers Union has banned any increase in the fares. Iran’s taxi service includes hundreds of seasonal drivers, who do not have any license to transport passengers and they do this to create a second source of income. Since rationing has limited their quota to 100 liters per month the majority will not be supplying any service to the market. This causes a decrease in supply, while the demand has increased. Now many switch to public transportation for short distance trips to save their fuel ration for their long distance trips. Decrease in supply and increase in demand increase the equilibrium price in the market. For time being government is committed to rationing policy without supplying any fuel at market rate for at least two months. Iran markets are still adjusting. And the streets of Tehran already are quieter.

Tony award winner Mary Zimmerman has adapted Mirror of the Invisible World from 12th century Persian epic Haft Peykar, written by Nezami, Persian legendary poet whom Britannica calls: “greatest romantic epic poet in Persian literature, who brought a colloquial and realistic style to the Persian epic”.

Its story is a story of a young Persian King, Bahram V of Sassanid, who falls in love in with seven princesses from different lands. Bahram builds a palace with seven domes for his seven brides, and he goes from one to the next, hearing the princesses' tales. Distinct tales, they also show different aspects of life and, especially, love, and they could stand independently of the rest of the book.

Their stories make Mirror of the Invisible World a must see. You can read more about it here at Goodman Theatre.

According to Fars News Agency, following rationing car fuel, the price of a 20 liters gas container has reached 140’000 Rials in the city of Zahedan. This agency reports that containers are bought for 110’000 Rials from gas stations by individuals seeking to profit from this situation. This put the price of gas at 7’000 Rials per liter in Zahedan. As always market does what a market does.

As an oil producer it is ironic that Iran imports 40% of its annual consumption of car gas. It is highly subsidized and many of authorities believe that an increase in its price will initiate hikes in domestic inflation. Since Iran has vast resources of oil, psychologically it is difficult for ordinary citizens to accept that they should pay a higher price for gas.

To this picture one must add a highly protected domestic vehicle manufacturing industry. For decades this industry continued to manufacture and to assemble cars originally designed in 1960’s and 1970’s. In the absence of competition, enjoying the position of a monopoly, Iran’s domestic industry was not concerned by mileage per gallon of gas (MPG) of its products until recently. Importing more efficient cars was banned for several years and even when permitted customs and other fees increase their prices to a level that is not affordable by average Iranian. Thus the average MPG remains relatively low in Iran.

The demand for driving in Iran has been increasing for several reasons: first substitution factor: in the absence of efficient public transportation many Iranians have to drive to make their appointments. Secondly because of income factor, thousands of fixed wages Iranians use their cars to work as cab drivers in crowded metropoliteans of Iran to make extra money, an ironic way to re-distribute fuel subsidies. The increasing population of Iran’s suburbia also contributes to increase in demand for gas by simply requiring inhabitants to drive more.

So here we are, on one hand demand for driving and thus for gas has been increasing, while the efficiency of vehicles have not been improved. Demographically more and more people relied on cheap fuel to keep their transportation costs low or to create an income. Fuel subsidies keep increasing to an unbearable level.

For a long time Iranian economists have been arguing that government should stop subsidizing car fuel. They argued that such a stop would encourage investments in public transportation and designing more efficient cars. They reasoned that such a step would release government resources much needed for developing infrastructure and development projects. They also reminded authorities that moving toward market price would adjust the real cost of transportation, encourage public transportation projects and reduce the consumption thus eliminating the need to import fuel. Authorities fearful of public dissatisfaction and inflationary consequences turned a deaf ear.

Mindful of consequences of an increase in gas prices, government chose a more familiar path: rationing. President Khatami government initiated the project and planned for smart fuel cards. President Ahmadinegad administration followed the same path. Although cabinet tried to defer rationing fuel and sent mixed signals to the market, Parliament stayed firm and just a few hours ago Iranians learnt that rationing is for real. After all in the absence of a free market and a market price there was little else to do. And this is not the first time that a government tries to overrule market dynamics by using technology.

As of last night every personal car is allocated 100 liters per month, already known to be insufficient in the heat of southern Iran and traffic of Tehran and other metropolitan cities. According to ISNA, Fars News Agency and Entekhab news agencies and websites, in several cities people rushed to gas station to fill up one last time on the cheap gas.

Any observer wonders if rationing fuel would bring home the results expected by policy makers. In the presence of such a high demand for gas, a black market is inevitable, so the actual price that people would pay in the terms of money and opportunity cost would be close to the real one any way. Public might not be dissatisfied by increased inflation, but it will be dissatisfied by rationing. And government had yet to face the challenges caused by its not-so-well-liked policy. One wonders, one indeed wonders.

Monday, June 25, 2007

Just a reminder that the deadline for entering the EconSources.com Best Undergraduate Paper Competition is July 1! Please notify any students who may be interested.EconSources.comBest Undergraduate Paper Competition.The winner will be selected at the International Atlantic Economic Conference inSavannah, Georgia - October 7-10, 2007Submission Deadline: July 1, 2007Competition Information:To encourage undergraduate interest in economic issues, Burton G. Malkiel, President, and Franklin Allen, Vice-President of the International Atlantic Economic Society cordially invite undergraduate students to compete in the IAES annual undergraduate paper competition in Savannah this October. The winner of the student competition will receive: * A $500 award, * A handsome commemorative plaque, and * Complimentary publication of the paper in the Atlantic Economic Journal.For Further information: http://www.iaes.org/Scholarships%20and%20Grants/Undergraduate_Scholarship/index.htm

In a rare appearance Iran post-revolutionary prime minister has criticized country’s economic conditions and political groups’ lack of appreciation for the real life conditions of ordinary citizens. According to Ham-Mihan daily Mr. Mir Hossein Mousavi was speaking in Religion and Economics Institute in Tehran on the anniversary of explosion at Islamic Republic Party, which killed Ayatollah Beheshti and several government officials as well as MPs in 1981.

He told his audience: “We have a mass production of information and data from which we have eliminated moral and human related qualities gradually and replaced them by other concerns. We have focused on issues such as GNP, Inflation Growth and economic reforms, which are very important in economics, without paying attention to their implementation in the real conditions of ordinary citizens’ lives.”

He compared economic reports of recent years to those prepared at the early years of the republic and said: “at the beginning of revolution reports included a few brief paragraphs about revolution and the circumstances of the impoverished and then reported the economic tables and data. These paragraphs are considered emotional today and are eliminated.”

Speaking passionately he told his audience: “a few days ago I saw a photo of a girl with a dirty and black face carrying a sack in Tehran streets in one of newspapers, quoting authorities that 20% of Tehran’s children are homeless[1]. I do not think that this photo has affected many in the way it could have affected them in early days of revolution. We see these photos, we hear these statistics but we ignore them.”

He reminded his audience how Marxist groups’ lack of appreciation for the real life conditions and their fantasies about proletariat and bourgeoisie caused their failure after revolution. He warned against repeating such mistakes.

Mr. Mir Hossein Mousavi has been absent from political stage in Iran for 18 years and declined several calls to run in presidential and parliament elections. His recent speech has increased speculation in political circles in Tehran that if he is considering running for presidency in coming election.

[1]Author has not found that newspaper and doubts the accuracy of this statistics.

Iran foreign affairs ministry announced that Mr. Khazaei will become Iran's next envoy to the United Nations after Dr. Zarif, whose tenure has come to an end. Born in 1953, Mr. Khazaei served as an MP between 1980 and 1988 and has also worked as an advisor to the executive council of the World Bank.

Revenue or Cost?I spent over seven years in manufacturing before making the transition to healthcare and then finally to financial services. My first job after finishing an engineering degree, with GE Plastics, was to try and determine how to increase output. Fast-forward to my last two years at GE and I was an MBB managing a $50 million dollar year-over-year cost reduction budget. Six Sigma, in the world of manufacturing, and to some extent healthcare, was about cost reduction. So when I made the shift to financial services it took a while to realize that cost reduction was not the best Six Sigma strategy. Revenue enhancement projects were significantly more rewarding (financially), and easier to identify. Read more here: http://www4.asq.org/blogs/financial-services-six-sigma/

June 19, 2007 - “So, is America going to attack us?” asked the grinning young tough at Tehran’s Grand Bazaar, a vast labyrinth of well-stocked shops where he was idling with four of his friends, one of whom was a slightly older man dressed in militant black. I had approached them as an American journalist on my second day in Iran, hoping to record a little vox populi on Mahmoud Ahmadinejad, the radical Iranian president. Somewhat startled to have the tables turned on me so quickly.... Read more here:http://www.msnbc.msn.com/id/19315680/site/newsweek/

Micheal Hirsh's Diary From Tehran:June 18, 2007 - First things first: let’s get the most ridiculous Western caricatures of Iran out of the way. The capital, Tehran, is no armed camp, ready to do holy war with the Great Satan, who is lately personified by George W. Bush. In fact, in two days here I have seen precisely two Iranian soldiers—one standing on a guard tower, staring lazily out at Mehrabad Airport in the 95-degree heat, the other doing some off-duty shopping in downtown Tehran... Read More here: http://www.msnbc.msn.com/id/19296324/site/newsweek/page/0/

Thursday, June 14, 2007

Just a few days ago 57 Iranian economists wrote an open letter to President Ahmadinegad to share their concerns about the disparities between current conditions and announced targets of Iran’s 2020 vision and 4th development plan. A few of signatories in their later interviews emphasized that they are ready to assist government in any way to meet the economic challenges ahead. It seems that these economists also are concerned that some members of administration do not believe in their sincerity.

The debate over economic policies has not been limited to this letter. Iranian media have disclosed the contents of a letter written by Mr. Rahbar former head of Iran’s Management and Planning Organization (MPO) in the time of his resignation from President Ahmadinegad’s cabinet. In this letter Mr. Rahbar had warned against the policies that undermine the role of MPO, over which he disagreed with the President. The list does not end here either.

Recent weeks have witnessed a spirited debate over interest rate in Iran. After months of debate and second guessing President Ahmadinegad lowered interest rate for the banking system in Iran. This surprise move had not been expected by anyone. Just hours before its announcement Minister of Finance and Head of Central Bank were assuring Iranian bankers that interest rate would not change. Several Iranian authorities were fast to point out that lowering interest rate would not be official until it is approved by Country’s High Council for Economic Affairs. The debate is still going on.

Certainly this amount of debate in Iranian media regarding economic affairs exhibits a healthy practice of free exchange of ideas and opinions, something that one does not see often practiced in countries that USA calls allies. However it also increases the possibility of polarizing the economic debate with political affiliations in the country. Thus it might transform matters of policy to matters of principle and individual prestige. This is a dangerous transformation that could compromise country’s economic growth and sustainable development.

I quote:BRUSSELS, Belgium - Afghanistan's defense minister on Thursday dismissed claims by a top U.S. State Department official that there was "irrefutable evidence" that the Iranian government was providing arms to Taliban rebels."Actually, throughout we have had good relations with Iran and we believe that the security and stability of Afghanistan are also in the interests of Iran," Abdul Rahim Wardak told The Associated Press.

Wednesday, June 13, 2007

One the most sacred holy shrines of Shiite faith was bombed today in Iraq. Both minarets of Imam Askari mosque in Samarra were destroyed as the result of the explosion. Imam Askari is Shitte 11th Imam and his son is Imam Mahdi, the twelfth Imam who is Shiite Hidden Imam and redeemer. Grand Ayattollah Sistani and several others have called for calm.

Tuesday, June 12, 2007

Today Dr. Nahavandian was elected the head of Iran Chamber of Commerce, Industry and Mining (ICCIM). His opponent was the incumbent head of ICCIM, Mr. Khamoushi. 308 representatives of Iran’s private sector voted in this election and Dr. Nahavandian received a majority of 165 votes versus 139 for his opponent.

This has marked more than a simple change in the leadership of an important national economy institution. Mr. Khamoushi served as the head of ICCIM for more than two decades. He has been a long time advocate of private sector expansion in Iran and is affiliated with traditional Bazaar networks.

Dr. Nahavandian served as a deputy minister of commerce during President Khatami administration and currently is a member of board of Tehran Chamber of Commerce, Industry and Mining. He has received his doctorate in economics from George Washington University in 1993. His election agenda includes supporting privatization, expanding e-commerce, joining WTO and extending ICCIM presence in global markets.

This is not what you, my dear reader, consider an important piece of news. It is sort of news that one needs to tell you, so you might learn that life goes on in Iran.

There will be an Alumni Gathering for Sharif University of Technology graduates and faculty members on June 29th, 8th of Tir in Iranian Calendar, in Mehrabani (Kindness) Hall at Inqlab Complex. A buffet dinner is provided and pieces of folkloric music will be performed by Santour and Kamanche.

Sharif Alumni are invited to contact Alumni association to purchase passes for this event.

Monday, June 11, 2007

Today I ran to Subway to get a sandwich for lunch. While browsing the menu, I noticed an interesting use of Marginal Utility concept. Usually sandwiches are advertised using their sizes, e.g. $2.99 for a 6 inches long sandwich and $5.99 for a 12 inches long one. But in this particular store in Evanston, the price is mentioned only for 6 inches long sandwiches. At the end of the column there is a note: “feeling hungrier? Get a foot long sandwich for only $2.99 more”.

Instead of having the total price for a 12 inches sandwich, the owner has advertised how much more a customer needs to pay for it. Now if one accepts a 6 inch long sandwich as the measuring unit, then a 12 inches sandwich is two units of product, or a very close substitute to two 6 inches sandwiches. The marginal utility of having the first sandwich is much larger than the second one, thus the willingness to pay for the second one is less than the willingness to pay for the first one. Thus by marketing how much one needs to pay to have an extra unit and showing that it is less than the price of a 6 inch sandwich, Subway is following customers’ demand.

Axis of Evil Comedy show was in Chicago last night. The troops included Maz Jobrani, Ahmed Ahmed, Aron Kader, Din Obeidollah and Sharif from Dayton, Ohio. These 5 comedians with Middle Eastern backgrounds put on a fabulous show.

What I found most interesting was the way these comedians have been able to build a bridge between different cultures. Din and Aron have grown up in the mixed families; their fathers are Palestinian and their moms American. Maz and Ahmed have been living in the States for the most of their lives. They all understand the cultures at the both ends of the gap. They use the differences, the typos and the generalizations to make one laugh.

The uniqueness of their show rests in their ability to talk comfortably about rather serious concepts in non-political way. The interesting part of their act is that their jokes are not limited to the Middle East. They say a few things about America, like any other Normal Average American comedian. They also are able to make a connection between different perspectives to highlight the common ground, the common likes and dislikes.

They made fun of everyone, from President Bush to Average Muslim guy in Dubai. Their audience was as mixed. There were all sort of the Middle East oriented ethnic groups as well as many Americans and African Americans in the audience. Comedians used this opportunity to talk about how it feels to be an Arab-American or Iranian-American in post 9-11 era. Audience loved their jokes and laughed loud at many of them. Particularly an explosion of laughter followed Aron’s remarks when he said:

“Religion is the thing. It is everybody’s thing. All religions are considered themselves to be the Chosen One. You do not have a religion who tells you: “we are not the Chosen ones, but we are highly recommended ones… People say a lot of good stuff about us!”

Axis of Evil Comedy show certainly is not a Chosen one, but it is indeed highly recommended to all who can enjoy a good laugh and want to learn about other cultures. I am sure Chicago is looking forward to seeing them again.